Treasury Secretary Henry Paulson's $700 billion proposal to stabilize the banking system may push the national debt to the highest level since 1954, threatening an erosion of foreign appetite for U.S. bonds.
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Paulson may be questioned on the borrowing impact of his plan at a hearing at the Senate Banking Committee today that begins at 9:30 a.m. He's asking lawmakers to lift the legal ceiling on the federal debt to a record $11.3 trillion from the current $10.6 trillion.
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``It's an alarming level of debt given that we're not fighting something like World War II,''
The government reaching the requested debt limit would entail every man, woman and child in the U.S. owing more than $37,000 each. The median U.S. income last year was $50,233.
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Michael Feroli, an economist at JPMorgan Chase & Co. in New York, says the combination of the Paulson plan, additional government expenditures, and a slower economy, could swell the deficit to $1.5 trillion -- 10 percent of GDP.
To be sure, several developed nations have debt levels far higher than that of the U.S., including Japan at 196 percent of GDP and Italy at 104 percent of GDP, according to the International Monetary Fund.